The fact that satisfied customers show greater loyalty, buy more often and in larger quantities, is well recognised. Customer satisfaction will lead to more sales and less marketing expenses. Yes, but it isn’t that simple.
Niels Nolsøe Grünbaum, Ph.d at Roskilde University in Denmark, argues that sometimes, the customer isn’t right, and sometimes customer satisfaction can mean fewer earnings. We look at some of reasoning behind it.
Which customers should be satisfied?
Non-profitable big name clients
One often overlooked aspect of achieving customer satisfaction, is that it does require a certain and sometimes large amount of investment. This investment may not always create the desired positive results, so in order to ensure that these are achieved, there are certain things to consider.
There are customers who unfortunately don’t actually generate enough profit to justify bending over to satisfy them. This is particularly the case within retail, where large retailers push their suppliers to increasingly longer payment periods.
It may therefore not be worth investing in satisfying this type of customer, even though it is a big name client. Rather there should be focus on calculating the profitability of every customer, and spreading the turnover across multiple clients.
Yes, it has been extensively proven, that there is a significant positive relationship between customer satisfaction, and profit. But, what about the customers who can’t be satisfied, or rather, who won’t be satisfied, the so-called ‘notoriously unsatisfied’. Does it generate profit for a company if you try to satisfy even the people who don’t want to be satisfied?
Niels Nolsøe Grünbaum would recommend, that businesses spend as little time on these customers as possible. Their demands should be quickly and professionally rejected, and not be given in to under threats of legal action and other pressures.
This may sound like a harsh way of dealing with these customers, but it does of course apply mainly to customers who after a holiday complain about the weather and that there was too much sand on the beach or that the water temperature was too low. In general, unreasonable complaints which a company should not have to answer for.
How much satisfaction is satisfactory?
Satisfaction comes from fulfilling the expectations of a buyer in relation to what is being bought. Niels Nolsøe Grünbaum recommends, that this expectation should be met, but not exceeded. Oversatisfying the customer will lead to unnecessary expenses, and not generate more profit.
A customers satisfaction is not a fixed construct, but dynamic and changeable. This means that if you exceed the customers expectations, those expectations will become higher. The customer will expect more and more according to how much their expectations are exceeded. This will lower profitability, and companies should therefore be very aware of what the expectations of a customer is, enabling it to make effective and optimal decisions when it comes to satisfying customers.
In other words, it’s not about creating as much customer satisfaction as possible, but creating just the right amount of satisfaction in order to be able to satisfy the customer.
Customer satisfaction is therefore not always a one way ticket to profitability. According to Niels Nolsøe Grünbaum it is worth considering if the customer is indeed right, and how satisfying them is affecting your profitability.